LORAS L. STEINES, PETITIONER V. ADMINISTRATOR OF VETERANS AFFAIRS
No. 90-6059
In The Supreme Court Of The United States
October Term, 1990
On Petition For A Writ Of Certiorari To The Illinois Appellate
Court, Third Judicial District
Brief For The Respondent In Opposition
OPINIONS BELOW
The orders of the Circuit Court for Rock Island County, Illinois,
(Pet. App. D) and the Illinois Appellate Court, Third Judicial
District, (Pet. App. C) are unpublished.
JURISDICTION
The order of the Illinois Supreme Court denying discretionary
review was entered on October 3, 1990 (see Pet. App. A). The petition
for a writ of certiorari was filed on October 25, 1990. The
jurisdiction of this Court is invoked under 28 U.S.C. 1257.
QUESTION PRESENTED
Whether, after petitioner defaulted on a mortgage guaranteed by the
Veterans Administration (VA), he received proper consideration in an
eviction proceeding of his defenses based on an employment
discrimination claim against the Department of the Army and an
administrative claim seeking waiver of his debt to the VA on the
guaranty.
STATEMENT
1. The Department of Veterans Affairs, formerly known as the
Veterans' Administration (VA), provides housing assistance to veterans
by guaranteeing home loans made to veterans by private lenders. Title
III of the Servicemen's Readjustment Act of 1944, Pub. L. No. 346, 58
Stat. 291, codified as amended at 38 U.S.C. 1801-1834. Under the
assistance program, in addition to guaranteeing veterans' home loans,
the VA enables veterans generally to avoid the requirement of a down
payment, see United States v. Shimer, 367 U.S. 374, 383 (1961), and
imposes limits on the charges that lenders can impose for the expenses
typically associated with purchasing a home, such as closing costs, 38
U.S.C. 1803(c), 38 C.F.R. 36.4312.
The various rights and responsibilities of the VA, the holder of
the loan obligation, and the veteran are governed by a comprehensive
set of regulations. See generally Shimer, supra; 38 C.F.R.
36.4300-4364; see also 38 C.F.R. 36.4334. These regulations
establish, inter alia, that any amounts paid by the VA on account of
the liabilities of the veteran "constitute a debt owing to the United
States" by that veteran. 38 C.F.R. 36.4323(e).
If a veteran defaults on a guaranteed loan, the holder may
foreclose on the property after notifying the VA of the default. See
38 U.S.C. 1832(a). Foreclosures are conducted by the holder in
accordance with the law of the state in which the property is located.
See 38 U.S.C. 1820(a)(6); 38 C.F.R. 36.4319, 36.4320. Foreclosures
are not prosecuted by the VA unless the holder fails to exercise
reasonable diligence in foreclosing on the property. 38 C.F.R.
36.4319(f).
If the holder forecloses and a deficiency on the mortgage debt
remains after the property is sold, the VA must reimburse the holder
up to the amount of the guaranty. 38 U.S.C. 1832(c); 38 C.F.R.
36.4321. The VA may then recover the amount it paid on the guaranty
either by becoming subrogated to the rights of the holder and pursuing
any causes of action the holder might have had against the defaulting
veteran or by seeking indemnification from the veteran on a debt in
the amount of the deficiency. 38 C.F.R. 36.4323(a), (e).
Before the VA may collect a debt resulting from its payment of a
guaranty, a veteran may challenge the existence or amount of the debt,
38 C.F.R. 1.911(c), or request a waiver on the ground that he or she
is not materially at fault and that collection would violate equity
and good conscience. 38 U.S.C. 3102(b); 38 C.F.R. 1.911(c). The
veteran is entitled to a hearing on a waiver request and may appeal an
adverse decision to the Board of Veterans Appeals. 38 C.F.R.
1.911(c). If the waiver is granted, the veteran is no longer
obligated to the VA on the debt; however, the maximum amount of the
veteran's entitlement to a future VA guaranty of a mortgage will be
reduced by the amount of the VA's loss. 38 U.S.C. 1802(b)(1)(B).
2. Under Illinois law at the time of the foreclosure action here,
the holder of a mortgage could foreclose by instituting a judicial
proceeding against the debtor in accordance with Ill. Rev. Stat. ch.
110, para. 15-108 et seq. (1984), repealed by P.A. 84-1462 Section 7,
eff. July 1, 1987, codified at Ill Rev. Stat. ch. 110, para. 15-1101
et seq. (Supp. 1990). Under these provisions, a judgment of
foreclosure is followed by a sheriff's sale of the mortgaged property
to satisfy the judgment debt. See Ill. Rev. Stat. ch. 110, para.
12-115. The debtor has six months after the sale to redeem the
property by paying the purchaser the sale price with interest from the
date of the sale. Ill Rev. Stat. ch. 110, para. 12-122.
If the debtor does not redeem and remains in possession of the
property after the redemption period expires and after a demand for
possession has been made, the judgment holder may secure possession by
filing an action under Illinois' Forcible Entry and Detainer Act.
Ill. Rev. Stat. ch. 110, para. 9-102(6). The only issue in a detainer
action is whether the plaintiff or the defendant has a superior right
to possession. Hale v. Ault, 83 Ill. App. 3d 78, 403 N.E.2d 635
(1980).
3. In 1982, petitioner obtained a VA-guaranteed home loan from
WestAmerica Mortgage Company to purchase a house in Moline, Illinois.
When petitioner defaulted on the loan in 1986, WestAmerica foreclosed
on the mortgaged property. The circuit court of Rock Island County,
Illinois entered a judgment of foreclosure in March 1987, and
petitioner did not appeal that judgment. WestAmerica Mortgage Co. v.
Steines, No. 86-CH-355 (March, 19, 1987). Thereafter, WestAmerica
purchased the property at a sheriff's sale, see Ill. Rev. Stat. ch.
110, para. 12-115, and assigned its rights in the property to
respondent, the Administrator of Veterans Affairs.
Petitioner did not redeem the property during the six-month
redemption period, nor did he vacate the property after that period
expired. During this period, petitioner apparently did file a request
with the VA for a waiver of his debt to the VA for the loss that the
VA sustained on its guaranty. It appears from petitioner's assertions
(Pet. 4) and documents in the appendix to the petition (Pet. App. L)
that in July 1990 the VA's Committee on Waivers and Compromises
granted petitioner's request, thereby waiving collection of
petitioner's debt on the guaranty.
In February 1989, respondent filed a detainer action against
petitioner in the Circuit Court for Rock Island County, seeking
possession of the property. Petitioner filed an answer and a request
for appointed counsel. In his answer, petitioner alleged that he
defaulted on the mortgage because he had been wrongfully terminated
from his employment at Rock Island Arsenal, a facility of the
Department of the Army. Petitioner's termination occurred in 1977,
more than four years before he obtained the mortgage, and was
apparently the basis for an employment discrimination claim pending
before the Equal Employment Opportunity Commission (EEOC). See
Defendant-Appellant's Brief of Interlocutory Appeal, Case No.
3-89-0377 (Aug. 31, 1989). Petitioner also alleged that he had
defaulted on his mortgage because he had lost his job at the John
Deere Company in 1986. Petitioner's argument appeared to be that as a
matter of equity the VA could not be granted possession of the
property while his employment discrimination charge was pending. The
circuit court denied petitioner's request for appointed counsel and
granted summary judgment in favor of respondent (Pet. App. D).
Petitioner appealed to the Illinois Appellate Court for the Third
Judicial District, which affirmed (Pet. App. C). The appellate court
held that the lower court properly rejected petitioner's
employment-discrimination defense. In so holding, the appellate court
relied on Illinois precedent establishing that a claim of wrongful
termination of employment is not "germane to a forcible entry and
detainer action." Pet. App. C, at 3-4 (citing Bethany Reformed Church
of Lynwood v. Hager, 84 Ill. App. 3d 684, 406 N.E.2d 93 (1980)). The
appellate court observed that, in any event, the employment
discrimination alleged here could not possibly have caused petitioner
to default on the mortgage, because the alleged discrimination
occurred four years before petitioner obtained the mortgage. Pet.
App. C, at 2-3.
The Illinois Supreme Court denied leave to appeal. Pet. App. A.
ARGUMENT
The unpublished order of the Illinois Appellate Court is correct
and does not conflict with any decision of this Court. Further review
is therefore not warranted.
Contrary to petitioner's contention (Pet. 10, 16), the state courts
did not err in granting possession of the property to the VA while
petitioner's employment discrimination claim against the Army was
pending before the EEOC. Whatever the basis for this claim (which is
not clear from the record), it obviously had no bearing on the loan
default that led to foreclosure. As petitioner admitted /1/ and the
Illinois Appellate Court observed (Pet. App. C, at 2-3), the events
underlying his discrimination claim occurred more than four years
before petitioner obtained the loan. Because the EEOC claim clearly
was unrelated to the detainer action, the state courts committed no
constitutional error in refusing to allow petitioner to litigate this
claim. Cf. Lindsay v. Normet, 405 U.S. 56, 66 (1972).
Nor were the state courts barred from granting possession of the
property to the VA in the detainer action pending a ruling on
petitioner's request for a waiver of his debt to the VA. The pending
waiver request and the detainer action involved different issues.
Petitioner's waiver request concerned the debt that he incurred under
federal law when the VA paid WestAmerica under the VA's guaranty
agreement. /2/ The detainer action concerned the VA's right to
possession of the property as an assignee of the right of WestAmerica.
Contrary to petitioner's contention (Pet. 11-12, 16), the pendency of
his waiver request in no way interfered with his state-law right to
redeem the property. Nor did it affect the VA's right to commence the
detainer action.
From all that appears in the petition, the state court proceedings
fully accorded with state and federal law. Petitioner does not
dispute that he defaulted on the mortgage; WestAmerica was therefore
clearly entitled to foreclose on the property. See Ill. Rev. Stat.
ch. 110, para. 15-108; 38 U.S.C. 1832. The judgment of foreclosure,
which petitioner did not appeal, entitled WestAmerica to possession of
the property; thus, when WestAmerica assigned its rights to the VA
pursuant to 38 U.S.C. 1832(c)(5), the VA properly proceeded under
state law to seek possession of the property by filing a forcible
entry and detainer action. Ill. Rev. Stat. ch. 110, para. 9-102.
Finally, there is no merit to petitioner's claim (Pet. 16) that he
was deprived of a right to counsel in the state proceedings. Illinois
has no statutory right to counsel in foreclosure or detainer
proceedings, and the Constitution does not provide such a right. See
Lassiter v. Department of Social Services, 452 U.S. 18, 26-27 (1981)
(indigent litigant presumptively has a right to counsel only in civil
proceedings in which, if she loses, she will be deprived of personal
physical liberty). Whether the trial judge had discretion to appoint
counsel for petitioner and whether that discretion was properly
exercised are not questions that merit consideration by this Court.
CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.
KENNETH W. STARR
Solicitor General
STUART M. GERSON
Assistant Attorney General
LEONARD SCHAITMAN
CATHERINE L. FISK
Attorneys
FEBRUARY 1991
/1/ Defendant-Appellant's Brief of Interlocutory Appeal, Case No.
3-89-0377, at 2.
/2/ After the VA sustained a loss by paying the lender on the
guaranty, the loss became a debt that the petitioner owed to the VA.
38 C.F.R. 36.4323. Because the VA appears to have waived the debt
(Pet. App. L), petitioner received all the relief he sought from the
VA on his administrative claim; he is no longer obligated to repay
the VA for the loss it sustained as a result of his default. If
petitioner wished to challenge the VA's determination of his debt or
the waiver, he could not do so in Illinois state courts, but was
instead required to appeal from the Board of Veterans Appeals to the
Court of Veterans Appeals and thereafter to the Federal Circuit. 38
U.S.C. 4052, 4092.